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Federal Mortgage Laws and Regulations

Federal law governs nearly every step of a residential mortgage, from the first disclosure to the closing table. This chapter summarizes the major statutes and rules a loan originator must know to keep the process legal, transparent, and fair.

RESPA and TILA: Disclosure Foundations

The Real Estate Settlement Procedures Act targets settlement-service abuses, while the Truth in Lending Act forces lenders to disclose the true cost of credit. Together with the integrated TRID rule, they set the timing and content of the borrower's key disclosures. Understanding when each disclosure is triggered and what it must contain is central to compliant origination.

RESPA anti-kickback
It is illegal to give or accept a fee, kickback, or thing of value in exchange for referring settlement-service business; only payment for services actually performed is allowed.
RESPA / Regulation X
TILA finance charge and APR
Lenders must disclose the finance charge and annual percentage rate so borrowers can compare the true cost of credit across offers.
TILA / Regulation Z
Loan Estimate timing
The Loan Estimate must be delivered or mailed within three business days of a completed application.
TRID (TILA-RESPA Integrated Disclosure)
Closing Disclosure timing
The borrower must receive the Closing Disclosure at least three business days before consummation of the loan.
TRID (TILA-RESPA Integrated Disclosure)
Tolerance categories
Certain charges (such as the lender's own fees) have a zero-tolerance limit and cannot increase, while some third-party fees may vary within a ten-percent cumulative tolerance.
TRID (TILA-RESPA Integrated Disclosure)

Fair Lending and Data Reporting

Anti-discrimination and reporting laws promote equal access to credit and let regulators monitor lending patterns. Originators must treat applicants consistently and hand off required notices on time. These rules apply from the moment an inquiry becomes an application.

ECOA prohibited bases
A lender may not discriminate against an applicant based on race, color, religion, national origin, sex, marital status, age, or because income comes from public assistance.
ECOA / Regulation B
Adverse action notice
When credit is denied or approved on different terms, the applicant must receive a written adverse action notice explaining the decision, generally within thirty days.
ECOA / Regulation B
HMDA reporting
Covered lenders must collect and report data on loan applications, including outcomes and applicant demographics, so regulators can detect discriminatory patterns.
HMDA / Regulation C
FCRA accuracy and access
Consumer report data must be accurate, and borrowers have the right to see the credit information used and to receive a risk-based pricing or credit score notice.
FCRA (Fair Credit Reporting Act)

Privacy and Anti-Money-Laundering

Because originators handle sensitive financial information and can be a channel for illicit funds, federal law requires both privacy safeguards and fraud monitoring. These duties protect consumers and the integrity of the financial system.

GLBA privacy notice
Financial institutions must give consumers a privacy notice describing information-sharing practices and, in many cases, a chance to opt out of certain sharing.
GLBA (Gramm-Leach-Bliley Act)
Safeguards duty
Institutions must maintain administrative, technical, and physical safeguards to protect customers' nonpublic personal information.
GLBA (Gramm-Leach-Bliley Act)
BSA/AML program
Mortgage lenders and originators must maintain an anti-money-laundering program and file Suspicious Activity Reports when they detect signs of fraud or money laundering.
BSA/AML (Bank Secrecy Act)

Compensation, High-Cost Loans, and Rescission

Several rules protect borrowers from steering, predatory pricing, and hasty commitments on their own home. They shape how originators are paid, flag especially costly loans, and give homeowners a cooling-off window. Each rule carries specific triggers and consumer rights.

Loan Originator Compensation rule
An originator's pay may not be based on the loan's interest rate or other terms, and dual compensation from both the borrower and the lender on the same loan is prohibited.
TILA / Regulation Z
HOEPA high-cost protections
Loans that exceed set rate or points-and-fees thresholds are high-cost mortgages subject to extra disclosures and restrictions, such as limits on balloon payments and prepayment penalties.
HOEPA (Home Ownership and Equity Protection Act)
PMI automatic termination
Borrower-paid private mortgage insurance must be cancelled automatically once the loan balance reaches 78 percent of the original property value, and borrowers may request cancellation at 80 percent.
Homeowners Protection Act
Right of rescission
On most refinances or home-equity loans secured by a primary residence, the borrower has three business days to cancel the transaction.
TILA / Regulation Z
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General Mortgage Knowledge

Last updated: July 2026

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